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Sustainable ETFs

Invest in the Future of the Economy

Discover VanEck’s Sustainable ETF Suite

Governments, companies and individuals have ambitious goals for cutting carbon emissions and heralding far-reaching change. Investors can take part in the transition to a more sustainable economy. They can finance it, by providing capital to virtuous companies, and potentially achieve positive financial returns.

At VanEck, we offer different sustainable ETFs to suit your investment views (classified as Article 9 according to the Sustainable Finance Disclosure Regulation - SFDR).

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    Future of Food ETF
    • Access to the multi-decade transformation of the food sector
    • Exposure to some of the pioneering sustainable food production ’s companies
    • Trend driven by a growing global population and accelerating climate change
    • Invest across alternative proteins, food flavoring and precision agriculture

    Risk of capital loss

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    Circular Economy ETF
    • Access to the current leading firms of this new economic concept
    • An increasingly popular business model prioritizing reuse, repair and recycling
    • EU aiming to a circular economy by 2050, with the Right to repair legislation as a crucial part
    • Businesses could benefit through lower costs and greater efficiency

    Risk of capital loss

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    Hydrogen ETF
    • A key emerging renewable energy source
    • Governments have placed hydrogen at the center of energy transition plans
    • Potential applications ranging from cars to trains and airplanes
    • Expected to comprise a significant share of the future global energy mix1


    Risk of capital loss

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    • 1 Source: IEA.

    Main risk factors: Equity Market Risk, Liquidity Risk, Limited Diversification Risk, Sector Concentration Risk, Risk of Investing in Smaller Companies, Risk of Investing in Energy Sector, Foreign Currency Risk.

    The above mentioned risks are the main risk factors and investors should check the KIDs and prospectus for more information.

    How Regulation is Driving Sustainable ETFs

    Growing numbers of investors are looking at investment ways that avoid harming the environment, promote social wellbeing and safeguard good corporate governance. Yet regulators and supranational entities are also acting to reinforce the trend for sustainable investing, for example through sustainable ETFs, introducing regulations and frameworks that make it easier for investors to back sustainable businesses. At the forefront of these are the UN Global Compact Principles (UNGC), the Sustainable Development Goals (SDGs) and the EU Taxonomy — all designed to help investors make informed sustainable investment decisions.

    UNGC Principles
    The UNGC principles are 10 pillars developed with the goal of guiding businesses to behave responsibly...
    Sustainable Development Goals
    The Sustainable Development Goals are 17 objectives that were adopted by 193 world leaders and...
    EU Taxonomy
    The EU Taxonomy is part of the European Green Deal which is leading the push for net zero carbon...

    The goals of the EU Taxonomy regulation are:

    • Increase Transparency
    • Create a Common Language
    • Promote Sustainable Economic Activities

    By forcing issuers of financial products and companies to disclose the sustainability characteristics of investments, the EU Taxonomy aims to increase transparency. This leaves less scope for greenwashing.

    The EU Taxonomy also aims to create a common language for defining what is green. This should improve communication between investors, issuers, project promoters and policy makers.

    The EU Taxonomy aims to channel investments, for instance through sustainable ETFs, towards sustainable economic activities that can contribute to the EU’s six environmental objectives. These range from climate change mitigation to protection of biodiversity, as set out below:


    EU Taxonomy Environmental Objectives


    Promote Sustainable Economic Activities

    ESG Investing and Returns

    Investing sustainably need not come, for the moment, at the cost of lower investment returns. While there is no conclusive evidence about the impact on returns, as sustainable investing grows in popularity, the most sustainable companies might be rewarded. For example, banks are cutting the cost of loans to companies cutting carbon emissions. It’s possible that this might lead to higher investment returns in years to come.

    Sustainable Fund Assets Increase Worldwide, 2010-2022

    Source: Statista.

    Take the MSCI World index, both in its environmental, social and governance (ESG) and non-ESG versions. One of the best-known global stock market indices, it gives exposure to the largest stocks. Encouragingly, the ESG version has not only achieved higher annualized returns (for a five years period) but also scored better when incorporating volatility, as expressed by the Sharpe Ratio.

    5Y Total Returns

    5Y Annualized Returns

    Sharpe Ratio

    Source: Bloomberg, data as of 31/03/24.

    Calling on Private Investors to Back the Green Transition

    In order to reach the 2015 Paris Agreement’s goals for a net-zero world, public investments alone are not sufficient. Private investment has a key role to play. Sustainable ETFs can represent a way to channel these investments.

    • Filling the Gap
    • Public-Private Cooperation

    Preventing a climate disaster is estimated to require approximately USD2-2.8 trillion of funding annually by 2030 and far higher than around USD770 billion in 20222. Transforming energy infrastructure accounts for much of the cost.


    2 Source: State of Green, IEA.

    Governments and private investors will have to fund the necessary projects collaboratively. High upfront costs, technical challenges and long-time horizons often require a blend of public and private financing. Blending public and private financing can de-risk these investments and attract investors. This risk sharing is known as blended finance and it is an increasingly popular way to accelerate the green transition.


    Investment/spending Needs for Climate Action Per Year by 2030

    (Total investment needs per year by 2030: USD 2-2.8 trillion)

     

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    Categories of investment Needs by 2030
    Transforming the energy system Power system Zero carbon generation $300-400bn
    Transmission and distribution $200-250bn
    Storage and back-up capacity $50-75bn
    Early phase-out of coal $40-50bn
    Transport system Low emission transport infrastructure $400-500bn
    Fleet electrification/hydrogen $100-150bn
    Industry Energy efficiency $10-20bn
    Industrial processes $10-20bn
    Buildings Electrification $20-40bn
    Energy efficiency and GHG abatement $70-80bn
    Green hydrogen Production $20-30bn
    Transport and storage $20-30bn
    Just transition Targeted programmes and safety nets $50-100bn
    Coping with loss and damage $200-400bn
    Investing in adaptation and resilience $200-250bn
    Investing in natural capital Sustainable agriculture $100-150bn
    Afforestation and conservation $100-150bn
    Biodiversity $75-100bn
    Migrating methane emissions from fossil fuel and waste $40-60bn


    Source: State of Green, “Finance for climate action – Scaling up investment for climate and development”.

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